The U.S. Government Accountability Office (GAO) released a report reviewing the administration of the U.S. sugar program, in which it found that the program creates higher sugar prices, which cost consumers more than producers benefit, at an annual cost to the economy of around $1 billion per year.
The U.S. sugar program is administered by the U.S. Dept. of Agriculture (USDA) and helps sugar producers by guaranteeing relatively high prices for domestic sugar, the GAO said. Sugar farmers in the U.S. see profits that are substantially higher than other domestic farms, totaling an estimated $1.4 billion to $2.7 billion in additional annual benefits.
However, higher sugar prices caused by this tactic end up costing consumers more than producers benefit, according to the GAO’s review — an estimated $2.5 billion to $3.5 billion annually, according to some studies. That means the economy faced a net cost of approximately $1 billion.
The U.S. sugar program’s current structure was put in place as part of the Agriculture and Food Act of 1981, according to USDA (cited by GAO in the report). The goal is to maintain an adequate supply of raw and refined sugar in the market while minimizing federal costs, the report adds, using tools such as federal sugar loans and import restrictions to control the amount of sugar available to the U.S. market and support prices.
In its report, the GAO said, “The program also restricts the amount of sugar entering the U.S. at a low tariff. The tariff restrictions are applied using a method based on 40-year-old data that doesn't reflect current market conditions. This has led to fewer sugar imports than expected.”
Trade agreements and tariff strategies have helped sugar producers but hurt consumers’ pocketbooks, as there have been fewer sugar imports than planned and delays in the ability to obtain sugar.
GAO added that some studies show that the program’s approach leads to declines in U.S. employment in segments such as confectionary processing, and that U.S. consumers and food manufacturers in 2022 paid twice the world price for sugar.
In the report, GAO recommends (1) USDA evaluates the effectiveness of the current method and alternative methods for allocating raw sugar tariff-rate quotas, (2) the U.S. Trade Representative (USTR) evaluates alternative allocation methods for consistency with U.S. law and international obligations, and (3) USTR uses the results of these evaluations to validate or change its quota allocation method.
Both USDA and USTR concurred with the GAO’s recommendations, and Grant Colvin, executive director for the Alliance for Fair Sugar Policy threw support behind the recommendations as well, saying in a statement: “Common-sense updates to the U.S. sugar program not only will increase supply chain reliability for manufacturers and lower costs for consumers, but also can be done while protecting the farm safety net for sugar producers. The GAO reinforces what food and beverage manufacturers have been saying for decades: The current U.S. sugar program is not keeping pace with today’s farm and food economy. It’s time to rebalance the program to ensure an equitable outcome for all stakeholders and provide relief for American small businesses and consumers nationwide.”